The Economic Theory of the Firm


Surprisingly, it is only fairly recently that economists have begun to think systematically about how to analyze the business firm. In this video, Professor Peter Klein traces the development of the Theory of the Firm in the 20th century, starting with Ronald Coase's seminal article in 1937 and continuing with later developments in the 1970s and 1980s by economists, such as Oliver Williamson, Oliver Hart and Benjamin Klein.


Ronald H. Coase, "The Nature of the Firm," Economica NS 4, no. 16 (November 1937): 386-405.

Oliver E. Williamson, "Transaction Cost Economics: The Governance of Contractual Relations," Journal of Law and Economics 22 (October 1979): 233-61. Chapter 12 in Williamson, 1990.

See also: Oliver E. Williamson, "Transaction Cost Economics: An Overview," in Peter G. Klein and Michael E. Sykuta, eds. The Elgar Companion to Transaction Cost Economics (Cheltenham, U.K.: Edward Elgar, 2010), pp. 8-26.

Benjamin Klein, Robert A. Crawford, and Armen A. Alchian, "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics 21 (1978): 297-326.

Sanford J. Grossman and Oliver D. Hart, "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy 94, no. 4 (1986): 691-719.

Armen A. Alchian and Harold Demsetz, "Production, Information Costs, and Economic Organization," American Economic Review 62 (December 1972): 777-95.

Michael Jensen and William Meckling, "Theory of the Firm: Managerial Behavior, Agency Costs, and Capital Structure,"Journal of Financial Economics 3 (October 1976): 305-60.